Cypress Semi Posts Solid Results Ahead of Its Infineon Acquisition
Cypress Semiconductor (NASDAQ: CY) released solid second-quarter 2019 results on Thursday after the markets closed. The semiconductor manufacturer once again highlighted revenue and earnings above the midpoints of its latest outlook ranges, led by the relative strength of its Wi-Fi and Bluetooth offerings to support growth in the lucrative Internet of Things (IoT) market vertical.
Of course, Cypress stock is little changed because the company recently agreed to be acquired at a hefty premium by Germany's Infineon Technologies (NASDAQOTH: IFNNY). But the acquisition isn't expected to close until the end of this calendar year or early 2020. So, in the meantime, let's take a closer look at what Cypress accomplished this quarter.
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Cypress Semiconductor results: The raw numbers
Metric | Q2 2019 | Q2 2018 | Change |
|---|---|---|---|
GAAP revenue | $532.2 million | $624.1 million | (14.7%) |
GAAP net income (loss) | ($12.7 million) | $27.7 million | N/A |
GAAP earnings (loss) per diluted share | ($0.03) | $0.07 | N/A |
Data source: Cypress Semiconductor.
What happened with Cypress this quarter?
On June 3, Cypress entered into a definitive merger agreement through which it will be acquired by Infineon for $23.85 per share in cash, good for an enterprise value of roughly $10 billion.
Note last year's second quarter included $49.5 million of revenue from Cypress' NAND business, which the company divested in early April to a five-year joint venture (of which Cypress owns 40%) with SK Hynix System IC. Excluding those sales, reported revenue would have declined a more modest 7.4%.
Adjusted for items like stock-based compensation and restructuring expenses, Cypress' (non-GAAP) net income was $97.2 million, or $0.25 per share, down 24.2% from $0.33 per share in the same year-ago period.
Both the top and bottom lines were above the midpoints of Cypress' guidance provided in April, which called for revenue of $515 million to $545 million and adjusted earnings per share of $0.22 to $0.26.
Adjusted gross margin expanded 110 basis points year over year to 47.2%, within guidance for a range of 47% to 47.5%.
By business segment:
Memory products division (MPD) revenue fell 30.4% to $178 million (primarily due to the NAND divestment)
Microcontroller and connectivity division (MCD) declined 3.9% to $354.2 million
What management had to say
CEO Hassane El-Khoury stated:
Cypress' world-class connect and compute solutions continue to gain strong momentum, including in IoT where Cypress' revenue was up 30% sequentially in Q2, driven by strength in Wi-Fi/Bluetooth combos as well as stand-alone Bluetooth. Cypress also continues to execute well in automotive where Cypress' revenue grew in Q2, both annually and sequentially, as our per-vehicle content continues to outgrow vehicle unit production levels.
Looking forward
Given the impending acquisition, Cypress won't be holding its usual quarterly conference call and will no longer provide forward guidance. But even if the acquisition doesn't close as expected, investors should be pleased Cypress essentially delivered as promised and has continued to steadily push forward its strategic growth initiatives.
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Steve Symington has no position in any of the stocks mentioned. The Motley Fool recommends Cypress Semiconductor. The Motley Fool has a disclosure policy.
